Meeka Gold Ltd (ASX:MEK) has released the results of a scoping study on its Murchison Gold Project in WA which has delivered a robust financial outcome, paying back project start-up capital along with a significant internal rate of return (IRR) over the life-of-mine.
The study contemplates underground mining at Andy Well, in addition to both open pit and underground mining at Turnberry.
Study outcomes
- Pre-tax undiscounted free cash flow of $182 million (post-tax $131 million) at A$2,400/ounce gold price (~A$100/ounce below current spot price)
- The project delivers an NPV5% of $124 million and IRR of 46%
- EBITDA of $457 million
- Average gold production of ~50,000 ounces per annum
- Total mine production of 4.9 million tonnes at 2.8g/t gold for 443,000 ounces
- 422,000 ounces of gold sold at AISC (all-in sustaining cost) of A$1,655/ounce
- 8-year life of mine
- Processing operations run for 9 years to fully deplete stockpiles
- Pre-production capital requirement of $52 million and payback period of 23 months
- 72% of gold production is sourced from Measured and Indicated Resources (Inferred 28%)
Advancing to pre-feasibility level
Meeka’s study assumes the existing Andy Well mill will be refitted with a replacement ball mill, gravity circuit and some components of the elution circuit, which were removed by the project vendors prior to the company taking ownership of the asset.
A small proportion of ore produced from the project will be toll processed through a third party owned processing facility.
The strong project fundamentals outlined by the scoping study provide the company with the confidence to advance the project through to the pre-feasibility level while continuing to drill test possible extensions of the existing 1.1 million ounces resource.
Project economics at various AUD gold prices.
“First step toward putting the Murchison Gold Project back into production”
Commenting on the outcome of the study, Meeka CEO Tim Davidson said: “Delivery of this study is the first step toward putting the Murchison Gold Project back into production.
“We are extremely pleased with the strong project fundamentals demonstrated by this work and it gives us confidence to progress through to the next phase with commencement of the pre-feasibility level study with immediate effect.
“The study demonstrates the project is capable of delivering significant value for shareholders, far in excess of the cost to acquire the project and the estimated capital required to restart production.
“We also have a clear plan in place to systematically drill test possible extensions to the large 1.1Moz resource, which has the potential to further enhance the value of the project.”
Project cash flow at A$2,400/oz gold price.
Next steps
The study successfully outlined Meeka’s preferred mining and treatment plans, likely production and cash flow profile, development timeline and capital requirements.
However, the level of detail associated with the activities contemplated to occur in the early years of the study is considered by the company to be at a level beyond that which would normally be considered standard for this preliminary level of study.
The following work programs are required to progress parts of the study to pre-feasibility level or higher:
- Further drilling to improve the confidence in the deeper portions of the Turnberry Mineral Resource planned to be extracted by underground mining methods – this is currently underway as part of the Phase 2 drill program commenced in September 2021
- Further comminution and metallurgical test work covering the fresh rock portion of the Turnberry Mineral Resource – planned to take place in Q3FY22
- Completion of hydrogeology and environmental studies at Turnberry to support permitting applications
- Submission of updated Mining Proposal, Project Management Plan and Mine Closure Plan